WHEN PERSONA COMMUNICATIONS was first sold back in 2003-04, I remember attending one of the then-public company’s annual general meetings of shareholders. I don’t recall, but it may have been the final one before its sale. What I do remember are many angry investors wondering just what the heck this Canadian cable company was doing wasting resources in the Caribbean.
The company had purchased Cable Bahamas in 2002 and some investors thought they were being taken for a ride while the company’s senior executives looked for some nice white sand upon which to land and retire. The company’s biggest shareholder at the time, John Risley, knew differently and when Persona was sold its leaders then turned their attention to growth in the Caribbean.
While Cable Bahamas was its first beachhead, as it were, the key to what has become Columbus Communications is its one-of-a-kind network ring (now 28,000 kms long) throughout the Caribbean which lands on 22 countries, providing off-island backbone to Columbus and other carriers. Columbus bought that undersea asset out of bankruptcy in 2005 (the former New World Network) and now, through builds and purchases, runs cable operations under the Flow banner in Trinidad & Tobago, Jamaica, Grenada and Curacao (it sold Cable Bahamas back to the Bahamian government in 2010), and will soon move into Barbados.
Risley – the self-made-billionaire co-founder of Clearwater Fine Foods, one of the world’s largest seafood companies, and founder of Ocean Nutrition Canada, the world’s largest Omega 3 supplier – is now the controlling shareholder of Columbus (Canadian financier Michael Lee-Chin is another large backer) and in a recent interview with Cartt.ca editor and publisher Greg O’Brien, Risley (pictured) says he is delighted by the decision he and the other Columbus leaders (like CEO Brendan Paddick) made to invest in Caribbean communications – and that he enjoys his role as an outsider asking stupid questions. What follows is an edited transcript of that chat.
Greg O’Brien: I’ve done some research into your history and the first question I had I had is how does a guy whose background is all food-related get into cable and telecom, and get into cable and telecom in the Caribbean?
John Risley: The answer to that is Brendan Paddick. In fact, I convinced Brendan to come on the Fishery Products board when we took over Fishery Products. We had a common friend, that’s how I was introduced to Brendan. And you’re quite right; I knew absolutely nothing about the cable TV business, other than as a consumer. That was the extent of my knowledge. But, I like Brendan a lot, thought he was smart guy, and so I became an investor in Persona, and a director. Brendan’s growth strategy for Persona, as I’m sure you might be aware, was that essentially all the consolidation had happened in the Canadian market and there was really no opportunity to do anything more.
GOB: (By 2004) they had bought just about every small cable company that was willing to sell to them.
JR: And the market was dominated by the big guys, and was always dominated by the big guys, so where do you try to grow? His answer was the Caribbean and Latin American, but many of the company’s institutional shareholders thought this was a “go to beach” strategy for Brendan kind of thing, as opposed to a real business opportunity.
GOB: I remember that. I went to what may have been Persona’s final AGM, or one of the final ones at the Royal York hotel and that was the accusation, I believe.
JR: So because I had much more intimate knowledge of Brendan and understood exactly what he wanted to do, I had no trouble believing in that strategy. I think that I was probably the largest shareholder at Persona at that time, with 20% or something. Anyway, the result of all of that was that we came away with the Cable Bahamas asset that previously had been resident inside Persona, and we used that as the platform around which we built Columbus, or, really, Brendan built Columbus.
GOB: From my point of view, the biggest asset would be that undersea fibre network that you’ve got linking everything – linking all those countries. That seems the key.
JR: It would be really nice to say that was in our game plan and we always knew that we were going to do this. Quite frankly we started out focused on the cable TV play and then quickly realized that many of these jurisdictions were isolated and what brought them together, what really made them competitive or not was the access to bandwidth – off-island bandwidth. This asset was, as you perhaps know, owned by the banks who had financed it.
GOB: It was distressed (in 2004), as they say.
JR: Yeah. They had been through a process… but luckily for us had not received bids that were attractive enough for them to give up ownership and sell it. So when we found out about it, I was actually at a program that I go to every year in Boston, and I said to Brendan, look, I’ll call the bank that was leading the charge, then the administration of the company and Brendan came to Boston, we met those guys… and ended up doing a deal with them. It was a very difficult deal because there were a number of banks involved, but the company today would not work without the ownership of that asset.
GOB: And you’re able to even sell bandwidth to your competitors, which is an interesting position to be in.
JR: Yes, but having said that, the implication of that statement is that somehow we’re able to take advantage of the situation and in fact what led to our ownership of the fiber backbone, if you like, was the ridiculous pricing that existed in the industry there. We essentially said once we own this, the last thing we want to do is to convince all our competitors that they too need to own their own network. That would be pretty stupid. So we became aggressive competitors in the context of being very competitive price providers and our competitors do business with us because it suits them to do business with us.
GOB: You’ve been at this for quite a number of years now, so has your investment performed and grown as you had foreseen, or to a satisfactory level from an investor point of view?
JR: I did it originally because I like the dynamics of the business. I remember Rick Waugh, the CEO of Scotiabank, telling me that the bank had never, ever lost money in the cable TV business. That, I thought, was a very compelling argument for the business case around the industry, and I liked the dynamics of a business where what you’re risking is your return, rather than your capital. So that’s what attracted me to the business in the first place – and then ultimately these things all take people to work, and Brendan and I got along well together, he had the ambition to go do this and that was great because I wasn’t going to move to the Caribbean to do it and he had already made that decision.
I’ve helped three companies grow from zero to being reasonably substantial in three completely different industries and it’s not that it gets easier, but you learn a lot from the process. It’s a bit like building a house. You say when you’re finished, “Geez, I wish I could build another one because I now know so much more about building a house than I did when I started this one.” And that’s the same thing with helping to build a business – you learn a lot about the process. And a lot of those lessons are very generic lessons.
GOB: How are you able to transfer what you learned building Clearwater and (Ocean Nutrition) into building cable or telecom?
JR: It’s about risk mitigation and people and decision making and discipline around reporting systems; how you make decisions, when you go fast, when you go slow, delegating responsibility to smart people and then being there when they need to talk about situations.
GOB: You’re not an investor in cable or telecom in Canada?
JR: No.
GOB: Just down here, the majority shareholder for Columbus.
JR: Over 50%.
GOB: And Mr. Lee-Chin is still?
JR: Yes. He holds shares in two different ways… personal and then he owns shares through his funds. So he would be the next largest shareholder in combination of those two entities. And then management essentially holds the rest.
GOB: Earlier we were talking a little bit about Bell and Astral getting together. Do you see Columbus interested in content?
JR: No, absolutely not. I am no expert on the business and I don't have any better crystal ball than anyone else, but on the other hand, sometimes an outsider looks at things differently than an insider and I consider myself to be an outsider because I didn't grow up in this business. I think owning content is an inherently different business than providing content, or distributing content. It’s a big mistake for Netflix, for instance, to get into the business of trying to produce its own content.
GOB: Rather than just delivering it.
JR: There are just huge risks around that. If you look at the movie business – and I know a bit about the movie business because it’s a business my son has always been very interested in – it’s just a terrible business for investors. The people who run the business make a lot of money because they screw investors, essentially. Investors have done terribly in trying to make money off of the underwriting of content production.
GOB: Sure. For every blockbuster movie, there are 20 which just tank.
JR: It’s like the airline business. It’s an industry that has lost more money than it’s ever made.
GOB: In TV production, if you look at the pilot season they have in the States, they make dozens of pilots and one or two get to be made into full series, and you just wonder if that’s creative money well spent, or wasted.
JR: I’m sure there was a point in time probably 10 years ago where the industry – the telcos and the MSOs – two distinct forces, looked at themselves as being relatively mature businesses and all of a sudden now those industries have reinvented themselves. Now they’re totally immature, things are happening so quickly and the business lines between them are changing. Each have gotten into the other’s business. I mean, who ever thought telcos were going to be in the provision of video content?
Who ever thought the MSOs would get into the telephone business? And the lines are going to continue to blur – in a completely different way – and the consumer ultimately is going to be the arbiter of what the rest of the industry looks like. Up until this point in time – and I think Apple has helped the change this quite a bit – the industry had driven the customer. The customer understood that he had to go here to get this, and he had to go over there to get that, and he had to somewhere else to pick up this other thing. And now with 500,000 apps…
GOB: On the iTunes App store…
JR: The customer now can be in the position of trying to make decisions. What the industry is waking up to is “how do I make sure that whatever device wins that I’m the provider of the mechanism which enables that device?” If the TV ends up wining, how do I make sure that I’m providing the broadband support or the signal for the TV. If the tablet device wins, or if the smart phone wins – and there may be a role for all of them – then how do I make sure that the customer buys – if he doesn't buy physically the devices from me – the services that enable those devices, from me?
GOB: So does that make you look at Columbus and think maybe wireless should be something you’re into, as well?
JR: Whenever somebody asks me a profound question, I try to answer the question by stepping back and getting up as high as I possibly can so that I don't get too granular. You get into trouble when you get too granular because then you have to be quite specific and you get trapped. I don’t like to be trapped. So my answer to that question is to answer a different question.
If you look at this marketplace, the Latin American/Caribbean marketplace, 15 years ago it was probably 20 years behind North America. The services were terrible, the prices were ridiculous. And so you had poor quality at exorbitant prices. Now, in most jurisdictions quality is equal. Certainly, everywhere Columbus does business quality is as good as anything you’ll get anywhere in North America and prices are very competitive. In fact, you get high-speed broadband service from Columbus anywhere in our jurisdiction it’s highly likely that you will pay less than you would per unit of data than you would in New York.
GOB: Your retail prices look pretty good.
JR: Absolutely. So my point is that the industry here has caught up with the rest of North America, and because it’s quite small and by definition we don't have to roll out services across multimillion subscribers. We can go into a test market, as we’re doing for instance in Trinidad with a test of a particular (multiscreen) software product that is unique in North America. No other MSO is going to be offering what we’re going to be offering in Trinidad soon.
The idea of an operator of our size – and we’re still tiny in this industry – can offer a really unique proposition to its consumers that no one else in North America is yet offering, shows you just how quickly the industry is changing, and to some extent the advantages of doing business in a geography such as we’re doing business. We own the Trinidad market – well, nobody owns any market, but we’re a big provider in Trinidad and certainly pretty well the only video provider, but it’s only 130,000 video subs… we don't have to worry about scaling up for a couple million.
There' is so much stuff happening in this business about trying to provide the customer with multiscreen services so that there’s nothing which is unique to my smart phone that I can’t get on my iPad that I can’t get on my telephone –and now we’re dependent on essentially four different devices, so how can we bring that together so you can get the services of all of them?
GOB: Is growth for Columbus going to come from providing those multiple services, or do you foresee adding more subscribers, more countries to the portfolio?
JR: We’re going to be doing business in a couple of new jurisdictions this year (the acquisition of TeleBarbados is in the works), so the answer is, yes, there are some new geographies that we’re going after. But if you look at the business – we’ve got a business solutions division which we didn't have three years ago.
GOB: Which is growing big time among North American cable companies.
JR: It’s growing big time for us. It’s going to be a huge part of our business because most of the competition in the space coming from the big telcos in the region is focused on the multinational corporations. Nobody is going after small and medium-sized businesses to the same extent we are.
We’re going after small and medium-sized businesses, growing just as fast as we can get physical office space and hire people and roll out the services. There’s a lot of infill. So where is the growth going to come from? It’s happening. The thing I worry about all the time is the extent to which the management team has got so much stuff happening at any one time.
This is not like the seafood business where you’ve got a finite quantity of raw materials so you’re focused all the time on trying to find opportunities to move the product upscale and add value to it and get more… and every once in a while there might be an acquisition opportunity coming along which gives you more raw material, but otherwise your focus is totally on marketing.
This industry is a business where there is so much stuff happening, both in terms of trying to help the (residential) customer and the corporate customer upgrade his access to services and take advantage of the huge technological revolution that is taking place. From upgrades to bandwidth and huge capex, I mean, we’ve spent… a lot of money and every year we just put back everything that we’re earning, together with everything that we can beg, borrow and steal on top of that.
GOB: Beyond Columbus and what’s going on down here in the Caribbean, what do you spend your time thinking about and doing back home with Clearwater, Highliner and Ocean Nutrition?
JR: Well, if you think about those businesses, they’re completely different fields, as you quite rightly say. So the consequence of that is that I really can’t be an expert in any one of them. But I don't want to be an expert in them because the minute you become an expert, you stop asking stupid questions and I like asking stupid questions. I like not being dragged down by the minutiae of things and getting into the granularity of trying to debate subjects.
So I say to people: “what is it you guys want to be doing with your time, what do you enjoy, what do you not enjoy, what do you worry about, where are the biggest risk, what can the organization do to help? Are you coming to work? Do you spend any time, or how much time do you spend thinking about how you can take what you’re doing and delegate it to someone else? Because if you’re not thinking about that, the company can’t grow. You’ve only got so many hours in the day and you’re already committed to spending as much time as you want to in the business.”
So if we’re going to grow, the guys have to be building a team underneath you so that we can keep pushing stuff down to people and those people in turn can push stuff down to other people – and you grow a company by helping people grow. You’ve got to help your people grow and let them make mistakes. Then, once they make mistakes you have to help them understand without getting angry or without blaming them what went wrong and what we need to do organizationally to prevent at kind of thing happening again and what we can learn from it. But that’s a lot of fun. It’s a lot of fun growing a business.
GOB: And you’re involved philanthropically with a bunch of things, too.
JR: Everybody has a responsibility to give back to the community, and there’s a time in your life when you’re growing and building and working hard and you don't think about that sort of thing – but when you get to be an old guy like me you do start to think about it and the community becomes important to you and you worry about it because you’ve had experience in attracting capital and building organizations and getting value for money. Those are all things that are really important to the charitable community and so you’re in a position where you can really help the not-for-profit sector. So I do spend quite a bit of time in the not-for-profit sector.
The two organizations that have consumed a lot of my time recently, one is as chair of the Canadian Youth Business Foundation, which is an organization that helps young entrepreneurs start businesses. We’ve learned that the most important feature of starting a small business and making it successful is not access to capital, but access to support and mentorship. What distinguishes the organization from everybody else in this field who just provide loans, is that we’ve got a team of about 3,500 mentors across the country, all of whom are businesspeople who have volunteered their time. When we make a loan to somebody we assign a mentor to them and it’s the provision of that mentor that really helps the business succeed.
Some young entrepreneurs may have multiple mentors and some mentors may have multiple folks that they’re working with. Some of the services may be on line but we absolutely insist on a person-to-person component to the whole thing. I’m also co-chair of the capital campaign at the Nature Conservancy in Canada, which is just winding down after a $500 million fundraiser. That’s been a lot of fun.
GOB: I'm wondering when you might bring cable to Cuba?
JR: Well, the problem with actually going to Cuba is the transition process is going to be a long, slow, painful one. We’ve seen this. Everybody thought 10 years ago Cuba was going to open up. I remember the Canadian government asking me to go down there in the early 1990s and help them do some things because it was all going to change over the course of the next couple of years. That was almost 20 years ago and very little has happened. So we’ve said to the Cuban government, look, we’d be happy to provide you with some services and hopefully they’ll grow into them. But as you know, their Sugar Daddy at the moment is the Chavez government in Venezuela.
GOB: And that’s unfortunate, really. I look at your map of the undersea cable and you go right around Cuba and hit every country but them. Just think what broadband would for the people there.
JR: That’s not specific to Cuba, it’s a generic statement: to have a modern economy you need a modern telecommunications infrastructure. It’s not possible to have one otherwise. The question is now, over what timeframe? You can blame it on Castro but… it’s the whole bureaucracy that is set up to run the country and the protection of fiefdoms that comes as a consequence of that entrenched bureaucracy.
GOB: Which happens in more places than just Cuba.
JR: Sure does.
GOB: You can look at politics, you can look at big businesses.
JR: Absolutely. It’s a very valid observation.
GOB: It’s more or less human nature, I think.
JR: Quite right.
